What happened to Eskom’s 9 point turn-around plan?

Load shedding is putting the prospects of economic recovery under severe pressure, according to the South African Chamber of Commerce and Industry (Sacci), as Eskom moved into a seventh successive day of rolling blackouts.

Sacci pointed to the devastating effect that Eskom’s load shedding, that has moved from stage 2, 4 and then 6, has had on the economy.

“This is a negative development in the context of the state of our economy and comes so soon after Statistics South Africa released its report indicating a contraction in the economy by about 0.6% in the third quarter of 2019. This in turn has a detrimental effect on job creation and economic growth,” the chamber said.

“The current challenges are weighing heavily in the business cycle. This has also caused some mines to shut down operations. Some of the telecoms companies have reportedly had their revenues put under extreme pressure due to lack of connectivity as a result of lack of power in the telecoms towers.”

President Cyril Ramaphosa is set to hold a meeting with the relevant executives on Wednesday, having cut short his trip to Egypt.

Eskom management will brief the president on Wednesday morning on “plans to mitigate and resolve the current electricity crisis,” the presidency said in a note.

Bloomberg reported that the rand declined the most in a month Tuesday as Eskom said there’s a high likelihood of power cuts all week and mining companies including Sibanye Gold Ltd, the world’s biggest platinum producer, temporarily halted operations.

The Department of Mineral Resources & Energy said in a statement it’s considering short- and medium-term interventions to address the electricity shortage. These include allowing independent power producers to bring capacity on stream earlier.

Besides Sibanye, Impala Platinum Holdings Ltd, Harmony Gold Mining Co and Petra Diamonds Ltd said production had been interrupted and they’re assessing when to resume output. Palladium rose above $1,900 an ounce for the first time and platinum headed for the biggest daily gain since September.

In Cape Town, the nation’s biggest tourism hub that’s gearing up for the year-end holiday season, the city council warned that if the power cuts intensify, it could interrupt water supplies.

The outages and heavy rains are creating a “perfect storm” for insurance companies, said Christelle Colman, a spokeswoman for Old Mutual Ltd’s property and casualty insurance unit. High levels of claims are expected due to foods spoiling in freezers, power surges damaging electronics, an increased number of vehicle accidents and additional incidents of theft, she said.

Vodacom and MTN Group Ltd., Africa’s largest wireless carrier, both said the power cuts were affecting their mobile-phone towers and batteries, Bloomberg reported.

Sacci said it has have received many complaints from businesses in the retail and other manufacturing sectors not being able to fulfil production schedules on sales orders during this critical period.

“The government’s promised plans in revitalising the economy by building infrastructure and driving policies for industrialisation, will now come into question, as energy is the biggest enabler for any of these plans to come to fruition.

“In this regard, the ability to make a dent on unemployment and to stop the economy from going into a recession, will become a mammoth task. The result is likely to be adverse, inflationary and interest rate pressure,” Sacci said.

“Eskom remains the biggest risk facing the economy. We remain pessimistic about the outlook for a positive assessment by credit ratings agencies. This could further spell doom for our economy as a down-grade to junk status takes many years to reverse.”

Sacci called for drastic steps to be taken by government to get on top of the energy situation in the country.

“The restructuring and solutions relating to Eskom, should start with the governance of the SOE itself.

“In this regard, the time has come for the government to re-evaluate its own role and capability on whether it has the necessary competencies, skills and experience to manage an organisation of Eskom’s complexity.”

Sacci said that the appointment of non-executive directors to SOE boards, should be handled by an independent structure that can be fashioned to be similar to the Judicial Services Commission (JSC).

“We believe that such a step- change in the appointment of directors, will eliminate a lot of the governance dissonance normally associated with the poor performance of SOEs.

“It is critical that the shareholder examines its own complicity in the destruction of value, lack of service delivery and the wastage that has bedeviled the SOE sector.”

Sacci said it is yet to be advised of the progress made with regards to the nine point plan committed by Eskom in November 2018 on the turn-around of the business.

“Business had planned around those commitments and we are uncertain about the implementation and progress made with that plan,” it said.

“We are also unclear about the various governance structures that the shareholder has tended to put around Eskom, namely, inter ministerial cabinet committees, transformation committees, various consultants, the board, national treasury etc. This contributes to lack of transparency around accountability.

“This is why we believe the restructuring of SOEs cannot exclude the evaluation of the role of the shareholder in the governance of the SOEs.

“There cannot be any place else to apportion accountability and blame.”


Read: How the latest round of load shedding will hit South Africa’s economy

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What happened to Eskom’s 9 point turn-around plan?